COMPARATIVE ADVANTAGES OF VIETNAMESE AGRICULTURAL PRODUCTS CASE STUDY OF COFFEE PRODUCT IN DAKLAK PROVINCE, VIETNAM

POLE DE FORMATION SPÉCIALISÉE (PFS) - CUD ASSOCIATION IN TRAINING BETWEEN HUA (VIETNAM) AND ULG (BELGIUM) NGUYEN VAN THICH COMPARATIVE ADVANTAGES OF VIETNAMESE AGRICULTURAL PRODUCTS: CASE STUDY OF COFFEE PRODUCT IN DAKLAK PROVINCE, VIETNAM MASTER THESIS IN INTERNATIONAL MASTER IN RURAL ECONOMICS AND SOCIOLOGY HANOI – 2010 i Pole de Formation Spécialisée (PFS) CUD MASTER THESIS IN INTERNATIONAL MASTER IN RURAL ECONOMICS AND SOCIOLOGY Nguyen Van Thich, Daklak Province, Vietnam Comparative advantages of Vietnamese agricultural products: Case study of coffee product in Daklak province, Vietnam Promoter: Associate Prof Doctor Ngo Thi Thuan, Hanoi University of Agriculture, Vietnam 2009 – 2010 ii ACKNOWLEDGEMENT First of all, I would like to express my sincere thanks to Hanoi University of Agricultural Vietnam and ULG Belgium I am greatly indebted to my supervisor, Associate Prof Doctor Ngo Thi Thuan, who has given me valuable direction, academic advices, criticisms, materials and encouragements Great thanks I wish to give to all of my professors and lecturers who have given me knowledge, practice and kindness during the Master course I am so thankful for the organization, help, enthusiasm and warm consideration of Prof Lebailly, Prof Dang Vu Binh, Doctor Vu Dinh Ton and all other staffs of project in the duration of the course work I sincerely thank to my colleagues in the Tay Nguyen University who have been kindly provided me materials and professional suggestions for the thesis and given me help in organizing and completing the fieldwork I would like to give many thanks to the staffs of Daklak DARD, Local Committees in Krong Pak, Buon Don and Krong Buk district for their cooperation and help during my fieldwork My thanks also go to all the households and other people that participated in my study in Krong Pak, Buon Don and Krong Buk district This study would have been not possible without their willingness and contribution I also would like to send my thanks to all of my classmates for their sharing, comment and assistance during the course Finally, I am so grateful to my family, my wife who always give me their encouragement, care and support I have the responsibility for this study and it reflects my own viewpoint Nguyen Van Thich -Tay Nguyen University – Vietnam iii TABLE OF CONTENTS INTRODUCTION 1.1 The necessity of the study 1.2 Objective 1.3 Research questions 1.4 Targeting and scope of the study 1.4.1 Targeting of the study 1.4.2 Scope of study 1.5 Structure of the report LITERATURE REVIEW 2.1 Comparative advantage theory 2.2 The common features of international agricultural market 2.2.1 An overview of the world market 2.2.1.1 Supply and demand 2.2.1.2 Coffee price movements since 1960s 2.2.2 Impact of liberalization on coffee product 2.2.3 Opportunities and challenges for Vietnamese coffee product 14 2.3 Overview of previous research 15 SITE AND METHODOLOGY OF RESEARCH 17 3.1 Overview about research sites 17 3.1.1 Natural conditions 17 3.1.2 Socio-economic conditions 18 3.1.3 Roles of coffee production in DakLak province 18 3.1.4 Households selection 22 3.2 Data collection method 23 3.2.1 Desk study 23 3.2.2 Primary data 23 3.2.3 Secondary data 23 3.3 Methods of Competitiveness assessment 24 3.3.1 Production Functions (Cobb Douglas) 24 3.3.2 Comparative Analysis 24 3.3.3 Marketing structure 26 3.3.4 Policy analysis 27 3.4 Research Parameter 27 3.4.1 Domestic resource cost 27 3.4.2 Cost and Price of coffee product 27 3.4.3 Some other parameters 28 3.5 Limitations of the study 28 RESEARCH RESULT AND DISCUSSION 29 4.1 Overview of the production, consumption and trade of Vietnamese Coffee 29 4.1.1 Overview of coffee production in Vietnam 29 4.1.2 Coffee consumption 32 4.1.2.1 Domestic coffee consumption 32 4.1.2.2 International coffee market and consumption 33 4.1.2.3 Coffee marketing system in Vietnam 34 4.1.3 Overview of coffee production households 35 4.1.3.1 Coffee production of households 35 iv 4.1.3.2 Performance and efficiency of coffee production in the survey household 37 4.1.3.3 Cost of coffee production 38 4.1.3.4 Analysis of Cobb-Douglas function 40 4.1.4 The competitiveness of coffee 42 4.2 Analysis of Comparative advantages of Daklak’s coffee 43 4.2.1 Steps of calculation 43 4.2.2 Method of conversion and compute financial prices to economic price 43 4.2.2.1 Social price of output 43 4.2.2.2 Social price of tradable input 44 4.2.2.3 Exchange rate regime 46 4.2.3 DRC calculation 46 4.2.4 Sensitivity of DRC ratio for coffee 48 4.3 Main factors affecting of Comparative advantages of Daklak’s coffee 52 4.3.1 The quality of coffee 52 4.3.2 Secondary processing 52 4.3.3 Effect of exchange rate 53 4.4 Solutions to improve Comparative advantages of Daklak’s coffee product 54 4.4.1 Increase coffee quality and decrease production cost 54 4.4.2 Extending of scale of coffee plantations 55 4.4.3 Intensive promotion trademark 55 4.4.4 Appropriate policies from the authority 56 4.4.5 Improving competitiveness 56 CONCLUSION AND RECOMMENDATIONS 58 5.1 Conclusion 58 5.2 Recommendations 60 REFERENCES 61 APPENDICES 63 v LIST OF TABLES Table 1: Planted area of Daklak perennial industrial crops 20 Table The total of coffee plantation areas of Vietnam and Daklak province (1995-2008) 31 Table 3: Top ten markets for Vietnamese green coffee exports in 2009 33 Table :Coffee exports of Daklak province 34 Table 5: Coffee area, yield and total output of the survey households 36 Table 6: Comparison of coffee production performance between districts 37 Table 7: Average cost of coffee production per hectare in surveyed areas 38 Table 8: The estimated results of the impact of input on technical efficiency in coffee production in Daklak province 40 Table 9: Domestic Resource Cost for coffee, Daklak province 47 Table 10: DRC sensitivity with changes in coffee export price 49 Table 11: DRC sensitivity with changes in coffee productivity 50 Table 12: DRC sensitivity with changes in cost of some imported inputs 50 vi ACRONYMS AND ABBREVIATIONS DARD SER OER FOB CIF DRC EU FAO GDP ICA ICARD ICO MARD IC GO MI VA NPK USD VND WTO VICOFA VINACAFE Ha Department of Agriculture and Rural Development Shadow exchange rate Official exchange rate Free on board Cost, insurance and freight Domestic resource cost European Union Food and Agriculture Organization Gross domestic product International Coffee Agreement Information Centre for Agricultural and Rural Development International Coffee Organization Ministry of Agriculture and Rural Development International cost Gross output Mix income Value added Nitrogenous, Phosphorous and Potassium United States Dollar Vietnamese dong World Trade Organization Viet Nam Coffee and Cocoa Association Viet Nam Coffee Corporation Hectares Exchange rate US$1 = VND 17,103 (Approximate; as of December 2009) vii ABSTRACT A study was carried out in 2009 to investigate Daklak’s competitiveness and comparative advantage in coffee production using gross margins, competitive advantage ratios and domestic resource cost ratios Secondary data were used in the analysis Gross margin for coffee was positive indicating that it is privately profitable to produce coffee Competitive advantage ratios were all less than showing that the produce is competitive in coffee production Using a shadow exchange rate of US$1 = 17,103VND, domestic resources cost ratios were all less than indicating that the Daklak province has comparative advantage in coffee production It was also noted that the Daklak’s comparative advantage is influenced by the exchange rate used, with a weakening of the local currency having an increase in comparative advantage Key words: Coffee, production, comparative advantage, domestic resource cost, market and consumption viii CHAPTER ONE INTRODUCTION 1.1 The necessity of the study Vietnam is characterized by the dominance of the agricultural sector The reform process of Vietnam after 1980s has obtained significant achievements in agricultural production, shifting from a food shortage to be a large exporter of some agricultural products such as rice, coffee, pepper, cashews and rubber in the world market Among these commodities, coffee ranks second after rice in terms of export value Vietnam is now the second largest coffee exporter in the world, with a share of about 15%, Vietnam also is the biggest Robusta coffee exporter in the world, with the world market share of 43% (AGROINFO 2008) Vietnam is highly competitive as a coffee producer and exporter thank to a favorable climate and environmental conditions and low labor costs Over 90% of coffee output is exported to nearly 60 countries However, Vietnam’s coffee fetches lower prices than those of the world average This can be explained by lower quality due to poor processing, drying facilities and post-harvest technologies, manifested in high moisture content Moreover, in the context of trade liberalization, Vietnam’s economy is easily vulnerable to external shocks The collapse of the world market prices in the some last years has lowered export earnings in spite of continuous expansion of Vietnam’s coffee export volumes While a shock stabilizing system is nearly absent or inefficiently operates, most of the risk is borne by the farmers This situation of the coffee industry is worsened due to the practice of non-zoned production causing an imbalance between demand and supply The large expansion of Vietnam’s coffee-farming area since 1994 partially explains the excess supply and the collapse of the world coffee prices in some last years This is not the only for the coffee industry but also of some other agricultural products in the transitional period of Vietnam towards market economy such as peppers and cashews The collapse of coffee prices in the world market seriously hampers coffee farmers’ profitability in Vietnam in general and DakLak province in particular, which accounts for 53% of Vietnam’s coffee volume With the recent trend of Vietnam to integrate international economic, agricultural production, which low cost and utilizes advantages and potentials of domestic resources, is vital for the economy in the context of intense competition Hence, recognizing the potential and un-favorable condition for the coffee product is crucial, which helps to develop policies to improve the competitiveness of coffee product To fill this gap in literature, I decided to study “Comparative advantages of Vietnamese agricultural products: Case study of coffee product in Daklak province” 1.2 Objective - Assessment of situation and efficiency of coffee production in Daklak province in recent years; - Analyze the impact of several inputs on coffee production results in Daklak province - Specify the comparative advantages and challenges of coffee production and consumption in Daklak province - Analysis of trade opportunities at global, regional and intra-regional levels; - Suggest necessary policies to solve the difficulties utilize the comparative advantages and increase the efficiency of coffee production and consumption in Daklak province 1.3 Research questions • What is the efficiency level of coffee production in Daklak? • What is the current advantage of coffee production in Daklak? • How are the obstruction to the coffee production and consumption in Daklak? • What are the solutions to increase efficiencies and comparative advantages of coffee production in Daklak? 4.4 Solutions to improve Comparative advantages of Daklak’s coffee product According to the observation, Daklak province not only is the main region of coffee production in Vietnam, but coffee also plays an important role of household income Therefore, improving comparative advantage of Daklak’s coffee is necessary 4.4.1 Increase coffee quality and decrease production cost Viet Nam exports coffee to 88 countries and territories and is the second largest coffee exporter in the world However, according to a recent report by the International Coffee Organization (ICO), 75 per cent of Vietnamese coffee did not meet quality improvement standards This has seriously damaged the fame of Vietnamese coffee on the global market, it said, adding that firms should improve the quality of their produce, as well as ensure food safety and hygiene This is also the way to improve comparative advantage of not only Vietnamese coffee but also Daklak coffee In order to increase coffee quality and decrease production costs, the following factors should be attended to: + Instead of chemical fertilizers by using organic fertilizer and combine livestock breeding and plant-growing (where there are suitable conditions for breeding domestic animals to provide manure for coffee plantations) + Appropriate methods should be used for coffee pruning + Harvest at the right time when coffee cherries are ripe; not pick green, overripe, dry or falling cherries + Growing pure coffee varieties to make the coffee beans firm and uniform with natural flavor + Increasing investment in wet processing technology and boosting links between coffee producers and processors could increase comparative advantage of coffee bean in Daklak In addition, Daklak province should produce mixed types of coffee together with Arabica So the production cost of coffee would be lower 54 and met the requirement of consumers If the only raw coffee and less value added coffee product is produced and supplied to the market, the competitiveness of Vienamese coffee will be impossible in the market economy 4.4.2 Extending of scale of coffee plantations According to the survey, there is about 80% household growing under 1.5 coffee It is very disadvantage for small scale of coffee plantation if compared to the large ones because of high costs Therefore, the best way to improve current situation is to encourage coffee growers to develop their plantations via collective land from other farmers who have low coffee productivity 4.4.3 Intensive promotion trademark Vietnam in general and Daklak in particular is well known in the world in terms of coffee quality, but does not have a national trademark or region trademark for coffee Vietnam should consider a label the country and Daklak should also popularize more region trademark such as “100 percent Buon Ma Thuot coffee” or “Daklak coffee paradise” or “ Buon Ma Thuot Coffee capital” and so on Daklak should build coffee specialties Daklak already has some experience of coffee specialization, for example with “culi” coffee or “weasel” coffee Development of coffee specialties will enhance the added value and avoid competition with other exporters Moreover, Vietnam should deeply built trademark in the instant coffee market segment via marketing activities for coffee products because Vietnam already has some successful instant coffee trademarks, such as Vinacafe, Nestle, G7 and Moment 55 Daklak’s authority should popularize intensive event “Central highland coffee festival” to improve Daklak coffee image, this is good way to introduce Daklak’s coffee to the world market 4.4.4 Appropriate policies from the authority From the DRC analysis, we can suggest some following mearsures: - The authorities should have good policies to promote production and export coffee products because these policies aim at encouraging the growers to invest their coffee fields - Good motivation will create suitable condition for farmer to invest more because this group has the highest comparative advantage thought both domestic and foreign source costs change - Besides, a good way to help coffee farmers invest their coffee plantations is to offer bank loans to farmers easily Especially the banks should increase loan to the farmers with flexible requirement such as collaterals and big amount based on their coffee plantations - Authorities also should pay more attention to farmers in handing over coffee techniques that help farmers be able to develop their production in term of efficiency Therefore, agricultural services of coffee growers should be developed in Daklak province 4.4.5 Improving competitiveness Various policies and actions need to be undertaken to improve Daklak coffee’s position in the global coffee market - Invest in research and development, focusing on the Coffee Research Institute and on technological advances to raise productivity, reduces production costs, and increases the quality of coffee - Increase the added value of coffee • Improve the quality of processed coffee and develop trade in processed coffee; 56 • Encourage the use of wet processing technology by designing favourable credit policies, applying farm contract systems linking farmers and processors, and setting up or expanding coffee fields for wet processing; • Strengthen co-operation among farmers (especially local ethnic minority people) and processors/exporters - Increase productivity • Promote the use of new varieties provided by specialized suppliers and support the gradual replacement of seeds with grafting in Robusta cultivation; • Apply modern technology, such as the scientific use of fertilizer, shade trees, irrigation, integrated pest management, and so on; • Reduce production costs Advanced irrigation methods such as sprinkling or drip irrigation could help reduce irrigation time and increase efficiency Increased irrigation efficiency and a reduction in irrigation hours would also help protect the ecological balance - Expand markets National and international market supply and demand analysis should be undertaken for different products The capacity of export enterprises should be increased Attention should also be paid to promoting marketing to Vietnamese consumers and increasing Vietnamese incomes in order to develop a strong domestic coffee market China should be a special focus A futures market and price hedging funds should be established - Fourth, implement a temporary storage policy for coffee A storage policy will help the government stabilize domestic prices Implementation of such a policy will require a number of activities, such as purchasing coffee directly from farmers or encouraging coffee processors and local purchasing networks to stockpile coffee, establishing a warehouse system with adequate capacity for producers, and international co-operation 57 CHAPTER FIVE CONCLUSION AND RECOMMENDATIONS 5.1 Conclusion Some main conclusion could be drawn from this study Daklak is the province where has the largest coffee area and the highest coffee productivity Coffee production is major source of income for households, creates jobs, and contributes to eliminate hunger and reduce poverty in not only Daklak province but also central highland Inputs such as Phosphate, Kali, Labor, water conditions and coffee age have impact on coffee yield According to analysis, the level of investment in those inputs can still be increased to achieve higher productivity The applications of urea and pesticides have reached the limit and have no longer impact on coffee yield Hence, coffee growers should consider the application of those inputs Most of coffee growers have not reached high technical efficiency; this may be attributed to the investment and their knowledge about coffee production Agricultural extension may play very active role in this sense Daklak has strong comparative advantage in coffee production However, the sensitive of the measurement with coffee export price, inputs prices and coffee productivity implies that the stability of the export market and market of inputs is very necessary The condition of land, climate, and soil contents of Daklak province is favorable for coffee production compared to other provinces Coffee plantation, therefore, is creating jobs and large economic benefits for residents However, while increasing coffee productivity and 58 efficiency in Daklak province is possible, it will face the following challenges: - Scale of coffee production of coffee growers in Daklak province is small and the supporting services are lacking + The observation showed that the coffee growers have been depending on their experiences and via learning from each other, so the taking care, harvesting and processing of coffee has not been following right technical procedure The extension of services to help the coffee growers in the use fertilizers, water, and other technical inputs has not fully effectively Time for extension services have not been adequate and only via the mass organization like women union, farmer union… and via public media There have been very few extension services provided by the governmental organizations and the services have not been given enough attention in terms of people and materials + The coffee growers are mostly on small scale There have not been any cooperatives, which provide services to generate advantages in consumption and production of coffee + A large proportion of households did not have access to information on coffee prices, materials and policies of government - There are several limitations in the policies and mechanisms of extending loans and financial supports to coffee growers: in spite of preferential treatments given to coffee growers like low interest rate, postponement of principal payment, current credit policies still have shortcomings, for example the regulation to link credits limits with the value of collateral, lending procedure are still cumbersome These shortcoming cause many difficulties to coffee growers and assembles + Increasing in investment in rural infrastructure was slow and not corresponding to coffee development in the province and the whole central highland region For instant, poor quality of road system pushed up the cost of transportation; internet has not been widely used These factors 59 are causing negative impact on the cost of production and consumption of coffee + The coffee purchasing and consumption agencies lack experiences and skills in doing business in the world markets The trademark of coffee in the central highland has not been established 5.2 Recommendations To solve the urgent problems and difficulties to help improve comparative advantage and keep their export markets of coffee in the central highland, these following issues need to be addressed + Reduce the cost of production to in crease the competitiveness of coffee in the world market via intensive investing in different cost items such as on one hand, reducing the level of Nitrogenous fertilizer and increasing the level of other types of fertilizers , on the other hand, increasing water and labor level used + Improve coffee quality through applies after- harvest advanced technologies to help increase selling price + Improve information on market prices so coffee growers can be proactive in coffee production + Extension investment on infrastructure such as irrigation system, transportation, electricity, telecommunication and storage system for coffee growing to help reduce cost of transportation and improve coffee quality + Increasing plantation areas of Arabica coffee coincides to reduce the plantation areas of Robusta coffee, therefore, there is a need to have an early master plan on coffee plantation area to correctly guide the investment strategy with right and effective focus + Improve other policies like exchange rate and interest rate policies and land tenure policies Because these policies have impact direct on comparative advantage of coffee 60 REFERENCES (April 2008) Opportunity and challenges for the world coffee sector Submission of the International Coffee Organization AGROINFO (2008) "Annual report: Vietnam's agriculture 2007 and prospect 2008." (2008): 13 Bowen, H P P (1984) United State export competitiveness Applied Economics 16 461-473 Buckley, P J (1988) "The Limits of Explanation: Testing the Internalization Theory of the Multinational Enterprise." International Business Studies.: 181193 Daklak (2008) Daklak statistic yearbook D o s department IOC (2010) Coffee for the future: Towards a sustainable coffee sector World Coffee Conference, Guatemala City, Guatemala Kaplinsky, F a (2001) Competitions policy and the global coffee and cocoa value chains Paper prepared for United Nations Conference for Trade and Development (UNCTAD), Institute of Development Studies University of Sussex, and Centre for Research in Innovation Management, University of Brighton Kaplinsky, R F a R (May 2001) Who gains from product rents as the coffee market becomes more differentiated? a value chain analysis IDS Bulletin Paper Nyoro, A M K a J K (October 2002) Coffee prices and regulation and their impact on livelihoods of rural community in kenya Nairobi, Tegemeo Institute of Agricultural Policy and Development, Egerton University Porter, M E (1990) The competitive advantage of nations, New York, Free Press T.Yap, J (2004) A Note on the Competitiveness Debate Discussion paper series No 2004-39 Tsakok, I (1990) Agricultural Price Policy: A Practitioner's Guide to PartialEquilibrium Analysis, Cornell University Press www.IOC.org www VICOFA.org.vn 61 Danida and the People's Committee of DakLak Province, "Report on crop diversification and agro market research" (June 2001) MARD and IFPRI, "Policy options for livestock sector of Viet Nam as a strategy for improving and diversifying income of Viet Nam—Recommendations and initial findings" (2000) Customs Department, "Import-Export Tariff and Value Added Tax for Imported Goods," Financial Publishing House (1999) Phan Quoc Sung, "Techniques of planting, taking care and processing coffee," Agricultural Publishing House (1995) Tran Thi Tram Anh, Nguyen Ngoc Bao and Pham Van Dinh Study on comparative advantages of typical agricultural products in some ecological regions in Vietnam, Agricultural Publishing House 2006 Lancon, Frederic, Comparative advantage technical report, NAPC, 2004 62 APPENDICES APPENDIX 1: MAP OF STUDY SITE Daklak province 63 APPENDIX 2: WORLD COFFEE PRODUCTION AREAS 64 APPENDIX HOUSEHOLD QUESTIONNAIRE I General information Head of a household Address…………………Commune ……………………………………District Number of people in family Number of labors in family The total coffee areas planed: The total coffee areas harvested: II Productivity and production cost Norm Productivity Unit Quantity Price Total Quintal/ha Cost Expenditure of fertilizer - Nitrogenous fertilizer - NPK - Organic fertilizer kg kg kg Irrigation cost 1000 VND Pesticides 1000 VND Labor cost - Pruning - Cleaning - Take care 1000 VND 1000 VND 1000 VND 1000 VND 65 - Harvested 1000 VND - Dried 1000 VND - Other Depreciation cost 1000 VND - Depreciation cost of coffee garden 1000 VND 1000 VND - Depreciation cost of machine Other cost III Other information Where did you sell the coffee bean? When did you often sell coffee bean? Who decides the price for coffee? Where did you get the information of coffee market? Which kind of coffee your family normally planed? (Robusta or Arabica) Do you think you can maintain producing the same or higher level of coffee production in the near future? What is your view concerning the curbing up of the low market prices for coffee? How much money does your coffee plantation generate to your household annually? If national prices, both to coffee and food crops remain in the same proportions, will you still continue to take care of your coffee plants just like in the past? 10 Do you think that co-operatives/associations can be useful for you? If yes, how? 11 What you think about growing only coffee and buy other commodities from market? 66 APPADIX ANALYSIS OF COBB-DOUGLAS FUNCTION Welcome to Minitab, press F1 for help Results for: HAM SX THESIS.MTW Regression Analysis: NANG SUAT versus Dam, NPK, The regression equation is NANG SUAT = 12.1 + 0.578 Dam + 0.0467 NPK + 0.401 Phan H.Co + 0.185 thuoc tru sau + 0.118 nuoc tuoi - 2.53 Cong/ha Predictor Constant Dam NPK Phan H.Co thuoc tru sau nuoc tuoi Cong/ha Coef 12.112 0.5778 0.04675 0.4010 0.1851 0.11807 -2.529 SE Coef 9.505 0.4749 0.06119 0.1160 0.1181 0.09072 2.159 S = 0.307544 R-Sq = 58.2% T 1.27 1.22 0.76 3.46 1.57 1.30 -1.17 P 0.020 0.227 0.044 0.001 0.120 0.019 0.024 R-Sq(adj) = 53.6% Analysis of Variance Source Regression Residual Error Total Source Dam NPK Phan H.Co thuoc tru sau nuoc tuoi Cong/ha DF 93 99 DF 1 1 1 SS 3.46004 8.79623 12.25626 MS 0.57667 0.09458 F 6.10 P 0.000 Seq SS 0.03256 1.52671 1.39992 0.28537 0.08572 0.12976 Unusual Observations Obs 66 76 91 98 100 Dam 5.51 5.09 5.15 5.37 4.99 NANG SUAT 6.9707 8.4557 7.0121 6.8341 6.7499 Fit 7.7363 7.7860 7.8173 7.6984 7.6826 SE Fit 0.0593 0.1081 0.0718 0.0777 0.0940 Residual -0.7656 0.6698 -0.8052 -0.8643 -0.9326 St Resid -2.54R 2.33R -2.69R -2.90R -3.18R R denotes an observation with a large standardized residual 67 APPENDIX 5: STRATEGIES OF HOUSEHOLDS FOR IMPROVING COMPARATIVE ADVANTAGES OF COFFEE No Strategies Update coffee information Output Control supply =>High price=>Increased income Intensive cultivation Reduced labour cost, improved coffee quality=>Increased income Applied new technologies Reduced production cost, improved coffee quality=> Increased comparative advantage=> increased income Increased wet processing proportion Increased coffee quality => Increased comparative advantage => Increased coffee price=>Increased income Used organic fertilizer Expanded areas of Arabica coffee Improved coffee productivity=>Improved coffee quality =>Increased comparative advantages Improved coffee quality => Increased comparative advantages=> increased coffee price Source: Results from group discussion in Krong Pak, Buon Don and Krong Buk district, 2010 68 ... THESIS IN INTERNATIONAL MASTER IN RURAL ECONOMICS AND SOCIOLOGY Nguyen Van Thich, Daklak Province, Vietnam Comparative advantages of Vietnamese agricultural products: Case study of coffee product in. .. fill this gap in literature, I decided to study ? ?Comparative advantages of Vietnamese agricultural products: Case study of coffee product in Daklak province” 1.2 Objective - Assessment of situation... advantages of coffee production in Daklak? 1.4 Targeting and scope of the study 1.4.1 Targeting of the study The targeting of study is coffee growing households, coffee traders and processors in Daklak